The complete DSCR loan guide: qualify on the rent, close in your LLC

A DSCR loan asks one question: does the property's rent cover its payment? If the answer is yes, you have a loan — without a tax return, W-2, or DTI worksheet anywhere in the file.

What a DSCR loan is

DSCR stands for debt service coverage ratio. Lenders in the space underwrite the property as a small business: its revenue is the rent, its debt service is the mortgage payment, and the ratio between them is the credit decision. Your personal income never enters the math — which is why these loans fit self-employed investors, portfolio builders past the conventional ten-loan cap, and anyone who'd rather not hand a lender three years of returns.

The trade: rates run roughly 0.5–2 points above owner-occupied conventional, and you'll put 20–25% down. For an asset that cash-flows, most investors take that trade every time.

The formula

At 1.00, the property exactly carries itself. At 1.25, there's a 25% cushion — and better pricing. Below 1.00, deals still get done at lower leverage or via a bridge loan while rents season, but the cleanest files start at 1.10+.

Rate tiers & what moves pricing

Three inputs set the tier: DSCR, LTV, and credit score. From there, adjustments move the rate in eighths — down for lower leverage or a longer prepay structure, up for cash-out, small multifamily, or interest-only payments. Our current tiers live on the rates page, adjustments included; the term sheet shows the math line by line.

The six documents that matter

A complete DSCR file is shorter than most people's vacation-rental listing:

1. Lease (or STR revenue history / market-rent appraisal addendum)
2. Entity docs — articles, operating agreement, EIN letter
3. Two months of bank statements for down payment + reserves
4. Insurance binder with the correct mortgagee clause
5. Photo ID
6. The appraisal — which we order, day one

Closing in an LLC

Title vests in the entity; members sign a guaranty. The loan reports on the business, not your personal credit, and your DTI stays untouched for the next primary-home move. Your CPA will ask whether the interest is deductible against the rental income — generally yes, as a business-purpose expense, but get that in writing from them, not from a lender's blog.

Five common mistakes

1. Quoting rent optimistically. The appraiser's market-rent finding governs — pad your DSCR estimate, not your rent estimate.
2. Forgetting taxes and insurance. P&I alone isn't PITIA; escrows sink more 1.05 files than rates do.
3. Cash-out timing. Most programs want 3–6 months of seasoning before a cash-out appraisal uses the new value.
4. Entity paperwork at the finish line. A missing operating-agreement page at day nine costs you the ten-day close.
5. Shopping rate without shopping certainty. An eighth of a point is $31/month on $300K. A blown closing date is the whole deal.